Tuesday, September 8, 2009

Potpourri

* Rob Bradley discusses the Houston Chronicle science reporter's public doubts on the "consensus" that he had been confidently told four years ago. (And if you don't trust anything from Rob Bradley, here is the Chronicle reporter's post. Nothing "anti-science" in there, it seems to me. Just saying, "Whoa, four years ago I was told this was a slam-dunk, and now even some top IPCC people are saying we might have a decade or two of cooling from this point. Huh?")

* Scott Sumner doesn't let Krugman off the hook (in his "What Went Wrong With Economics?" 8-pager) as easily as I did. Scott shows that Krugman's apparently fair and balanced survey of what happened in the last few years, doesn't jibe with Krugman's blog posts. Specifically, in his Solomonic magazine piece, Krugman says that the Fed did what it could but failed, whereas Scott shows that this doesn't fit in with what Krugman knows about options the Fed could have tried.

* Glenn Greenwald explains the ruling against Ashcroft. This is some scary stuff. For those who think Obama at least spared us "another Bush," try this:

The real significance of this case is that it highlights the dangers and evils of preventive detention -- an issue that will be front and center when Obama shortly presents his proposal for a preventive detention scheme, something he first advocated in May. What Ashcroft is accused of doing illegally is exactly the same thing Obama wants the legal power to do (except that Obama's powers would presumably apply to foreign nationals, not citizens): namely, order people imprisoned as Terrorist suspects -- "preventively detained" -- where there is insufficient evidence to prove they committed any crime.

I really urge everyone to read the section of the court's decision which sets forth in a concise, clear and non-legalistic manner the facts of what was done to al-Kidd by the DOJ: it's just 3 pages long, beginning on page 12271 [.pdf] ("Facts and Procedural Background") through 12274 (the three pages after that, also highly recommended, detail Ashcroft's culpability in creating this nefarious, illegal detention scheme). Please just go read this 3-page section laying out the facts of what was done to al-Kidd's life and what preventive detention powers allow the Government to do. Anyone who supports Obama's call for a preventive detention scheme is, by definition, supporting things like this (though, if anything, what happened to al-Kidd -- as horrible as it is -- is short and innocuous compared to what a "prolonged detention" scheme would permit: years of indefinite, charge-free imprisonment).

(I was going to scan the 3-page description and post the most unsavory things, but I leave it as an exercise for the reader.)

At the outset of the Obama Administration, as Greg Mankiw reminds us, their economists laid out a series of predictions about where the unemployment rate would be with the stimulus package and without it. Currently, the economy is doing worse than their predictions of unemployment without the stimulus and, of course, much worse than the predictions with stimulus.

You wouldn’t know this from the statements being made by Obama, Romer, Summers, et al. All of those statements focus on the second derivative: the unemployment rate is growing less quickly than before.

Now it is a “well-known” constant of economics that, in the absence of fiscal stimulus, the rate of increase in unemployment never falls. The big debate among economists is whether that rate remains constant or increases — in the absence of stimulus.

Now it is quite impossible for the rate of increase itself to increase without limit. So I guess the law must be: In the absence of stimulus the rate of increase will remain constant until no one is employed. Or perhaps until the Great Depression’s famous unemployment rate of 25 percent is reached.

In case he is too clever by half here, what Rizzo means is that even with no stimulus, obviously at some point the recession would have bottomed out, and the rate of increase of jobless workers would first have dropped, until finally it became negative (i.e. net jobs started to be added to the economy). So for the Administration tools to say, "The stimulus is working! The economy is shedding fewer jobs per month now, than it was before the money kicked in!" is a complete non sequitur.

* Due to my email to Jeff Hummel, Bob Higgs has clarified his assertion about real wages falling in the 1920-1921 depression. See? Who would have thought one email could change the world. (Note that Higgs and I were both unjustifiably confident in our position; Hummel slapped back my email and then I said something like, "Whoa you should send this to Higgs because he made the same mistake.")

* I have been sitting on the latest Auburn/GMU skirmish (concerning Mises' views of fractional reserve banking) because obviously, you don't casually throw down against the combined forces of Horwitz, Rizzo, and O'Driscoll. But I've got a bunch of traveling coming up, so I'm not going to get hip-deep into quotations from various editions of The Theory of Money and Credit. Let me just relate this anecdote:

At a party at Tom Woods' house, I actually managed to get Bob Lawson and Walter Block to call a truce. They were going at it, fueled by righteous indignation and alcohol [UPDATE: Walter emailed me and said he doesn't drink, so I mistook his Diet Coke for alcohol, sorry], and I said something like this: "OK what about this compromise? Bob is telling Walter that there is no way a modern financial economy is going to do business with all current banking operations turning into 100% reserves. Walter keeps insisting that two people can't have a simultaneous claim to the same piece of property. So, what if Bob's predictions are right, but what happens is that the volume of checking deposits shrinks considerably, to be replaced by an increase in very short-term loans?" Believe it or not, they both seemed happy with my suggestion.

"'So, what if Bob's predictions are right, but what happens is that the volume of checking deposits shrinks considerably, to be replaced by an increase in very short-term loans?' Believe it or not, they both seemed happy with my suggestion."

Actually, I say almost exactly the same thing every time I talk about 100% reserve banking in my classes. The students always say "But where will money come from for loans?" At that point, I note that a 100% reserve banking system would charge fees for deposits, so it's very likely that a lot of the money that goes into checking and savings accounts today will actually go into short-term CDs and the like. Generally, that's considered a "good enough" answer.

I'll object a bit to characterizing this as an Auburn/GMU skirmish. It's an FRFB/100% reserve skirmish for sure, but that doesn't necessarily line up school-wise. More important, the folks in the comments are hardly part of either group in some official capacity and they're going at it pretty good.

Calling it Auburn/GMU unnecessarily conflates this fairly specific issue with a whole bunch of others.